This follows on from the 6th July 2010 column How Keynes gave the ‘go-ahead’ for the Welfare State.

We have seen how Keynesian economic theories had a wider impact on the theoretical foundations for post-World War II progressivism than simply a prescription for how to deal with crises of ‘underconsumption’. They helped provide progressives with the sense that the state could manage capitalism’s tendency towards crisis and achieve prosperity within a capitalist economy in a way that the private sector left to its own devices was unable to.

This was in contrast to previous social democrat thinking that held that the state could do little good in a capitalist economy and only hope to manage the transition to socialism. It makes sense then that both Keynes and William Beveridge, who wrote the blueprint for the postwar welfare state, were liberals rather than social democrats. Donald Sassoon argued that, “Socialist theorists contributed very little to an understanding of how to institute social reforms under capitalism, or of how to run the system” (pp. 140-1).

It is also worth remembering that at that time even many mainstream economists (who generally opposed state intervention) were less than sanguine about capitalism’s ability to deliver self-sustaining prosperity. Looking back from 1964, the Scottish economist Alec Cairncross explained,

Long after Adam Smith, the literature of economics is strewn with prophecies of a stationary state in which growth would finally cease under the influence of some limiting factor such as population growth, the law of diminishing returns, a fuel shortage or a chronic tendency to over-save . . . The main shift of public opinion did not take place until the war and the post war years. (quoted in Sassoon, p. 245)

On top of that came the impact of the experience of a Great Depression and a World War, and thus:

The spirit of the time was on the side of social reformism . . . This reflected the amazing unpopularity of capitalism everywhere in Europe immediately after the war. These years constituted the nadir of capitalist ideology. Everyone was in favour of state intervention and structural reforms; no one wanted to return to the bad old days of the 1930s. Thus, the Italian Christian democrat leader Alcide De Gaspari, in a speech on 23 July 1944, claimed that Karl Marx and Jesus Christ, ‘a Jew like Marx’, shared the same message of equality and universal brotherhood, ‘the true image of redemption.’ (p. 140)

In all respects, then, the time was ripe for the state to play an active role in advancing the causes assigned to it by progressives.

But this is not to say that prior to that time, the efficacy of the state as an actor had been in doubt; it was more that these new ideas widened the provence of its activities.

Indeed, it is important to understand that, in contrast to our own time when the inherent inefficiencies of the state have been theorised in exquisite detail by neoclassical economists and others, the modern state was already regarded (even before the Depression and War) as fairly formidable.

The theorist who had done the most to explain why it should be so regarded was Max Weber. Indeed, his description of the features of the ideal-type bureaucracy, set out in his Economy and society : an outline of interpretive sociology (1922) is still taught in public administration courses today. Weber himself was not an advocate of bureaucratic administration (as is sometimes believed) but was rather seeking to analyse changes in society. He envisaged an historical process where the type of authority in society evolved from:

• charismatic authority (based on the personal charm or strength of an individual personality); to
• traditional authority (the source of authority for monarchies); to
• rational-legal authority, based on “a belief in the legality of pattens of normative rules, and the right of those elevated to authority under such rules to issue commands”.

Rational-legal authority is associated with a bureaucratic system of administration, the features of which included: fixed salaries, hierarchy, being bound by rules, and appointment on merit. This is in contrast with much of the way the system operated in the pre-modern state (or in the 19th century US under ‘clubs’ like Tammany Hall).

Moreover, these systems are to be found in both the public and private sector. Weber wrote:

In public and lawful government these three elements constitute ‘bureaucratic authority.’ In private economic domination, they constitute bureaucratic ‘management.’ Bureaucracy, thus understood, is fully developed in political and ecclesiastical communities only in the modern state, and, in the private economy, only in the most advanced institutions of capitalism.

That shared ‘modern’ identity for the public service on the one hand and the new managerial stata on the other is important. This was also the era of Taylorism, or ’scientific management’, in industry. The private sector too was trying to organise activity in a planned and mechanised way. Bureaucratic forms of organisation were not seen as a weakness of the state but a strength.

Even a 1944 tract Bureaucracy by Ludwig von Mises of the Austrian school of economics (whose analysis of the market’s superior dynamism was later to prove important to the critique of the state) had little to say about the inefficiency of bureacracy and focused more on how it undermined individual liberties

That made perfect sense. In the 19th and first half of the 20th century the state was something to be fearful of, not to deride as insufficiently energetic.

It was only after years of living with bureaucracies (public and private) in daily life, that the idea of the state as banal, mundane and lethargic — which we in New Zealand identify with the sitcom Gliding On — took root in the public imagination. That idea has of course now become central to the conservative critique.

For this reason, the kind of theoretical counter-arguments today’s progressives seek to mount about the efficacy of the state do not have direct parallels in the era of Keynes and Beveridge that we can draw upon, and a confident theory of “state effectiveness” is probably still to be fully developed.

To the extent that progressives of the 1930s and 1940s did have an implicit understanding that the state would be a capable actor, however, the “Weberian civil service” (though intended as a descriptive rather than normative model) is likely to have furnished a template in their heads. It may be that, despite all the changes in society and in our thinking about organisations since then, some of the essential elements of that template are still useful for that purpose today.

Links

• The full set of posts in the Theoretical Foundations series.
• Wikipedia entry on Max Weber.
• Bureaucracy by Ludwig von Mises.

Further Reading

• Peter Beilharz, “Max Weber” in Beilharz (ed) Social Theory: A Guide to Central Thinkers (1991).
• Michael Hill (ed), The Public Policy Process. Fourth edition (2005), Chapter 10 (on Weber and bureaucracy).
• Donald Sassoon, One Hundred Years of Socialism. The West European Left in the Twentieth Century (1997), Chapter 6 and Chapter 10.

Tags: Donald Sassoon, Ludwig von Mises, Max Weber, Taylorism

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